LONDON, April 25, 2012 /PRNewswire/ --
As a CFD trader, I know a thing or two about trading CFDs following major financial announcements - such as Apple's second quarter earnings at the close of the US market last night [Tuesday 24 April 2012].
Like many investors, I know that one of the keys to my trading success is to fully research and analyse my chosen market prior to placing a trade.
I chose to trade CFDs with City Index on Apple shares following the announcement - but I know many other traders would have been too nervous to react quite so quickly because they felt unprepared.
With this in mind, I have created an easy-to-digest guide showing you how to trade CFDs following such announcements as last night's. Focusing on the questions I get asked most often, I offer my honest answers making sure you are aware of both the highs and lows of trading CFDs.
How to Trade CFDs: The Guide
What is a CFD?
A CFD (Contract for Difference) is an agreement between two parties to exchange the difference between the opening and closing price of a contract.
How is it different from conventional trading?
Unlike more conventional forms of trading, traders choosing to trade CFDs with City Index can gain exposure to over 12,000 markets including shares, indices, currencies and commodities.
What is leverage?
CFDs are traded on something called 'leverage'. Leverage requires you to only pay a small percentage of the total trade value in order to open your position, i.e. your initial deposit. This is also known as 'margin' where instead of paying in full for your trade; you only pay an initial 'margin'. Leverage also comes with high risk as you can lose more than your initial deposit as both losses and profits are magnified in comparison to your relatively small initial deposit.
Is it tax-free?
As a derivitives product, you can not only use CFDs to speculate on the live price movements of thousands of markets, but you are also exempt from paying Stamp Duty at present in the UK. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
How do I gain from a market that falls? Traders can gain from a market regardless of its direction; meaning that whether the underlying market rises or falls, there is potential for profit.
For example, if you believe a market will fall, you may choose to 'go short' and sell. As a result, your profits will rise in line with any fall in that market's price.
However, if you predict wrong and the market rises, you will net a loss for every point increase in its market price. By being able to go short, you could use a CFD to hedge your portfolio; offsetting any potential loss in value of your physical investments.
Alternatively, you may think a market is going to rise and you choose to 'go long' and buy, and your profits will rise in line with any increase on that price.
Trade CFDs on Apple Shares with City Index
Through a City Index CFD trading account, traders both new and experienced can benefit from a range of features to help improve their trading experience when trading Apple shares.
It is important to remember that when trading CFDs, emotion can take over. Prepare for trading by creating a solid trading strategy, gain knowledge of your chosen market and practicing with a demo trading account.
CFD trading is exempt from UK stamp duty. Spread betting is also exempt from UK Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.
We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.
SOURCE City Index